The Financial Services Commission announced that the private-public joint strategic committee on National Growth Fund (NGF) held its second committee meeting on April 14. At today’s committee meeting, officials announced a second batch of investment megaprojects sought by the NGF and discussed specific investment plans that are aimed at strengthening the foundation of high-tech industries and their ecosystems.
The second batch of megaprojects has been drawn up based on the significant impact each industrial project can have on high-tech industrial ecosystems and considering the need to promote the growth of regional economies. In this regard, under the second batch of megaprojects, the NGF will provide investment and/or lending support for the following high-tech strategic projects—(a) next generation biotech and vaccines, (b) OLED display facility, (c) future mobility and defense, (d) sovereign artificial intelligence, (e) energy infrastructure development, and (f) Saemangeum development project (robotics, hydrogen, AI and energy).
NGF Investment Plans for High-tech Industries
The FSC plans to inject investments worth KRW50 trillion-plus for the next five years in the form of direct and/or indirect investment and lending support for the development of high-tech industries and their value chains to foster the creation of strong and innovative industrial bases.
a) KRW35 trillion in indirect investment via private-public joint investment fund
A private-public joint investment fund in the amount of KRW35 trillion will be operated through 20 different types of feeder funds to help close the loophole in investment blind spots across various industries.
This will facilitate a bold injection of investment support in the areas that have been previously overlooked by policy-based funds in the past. With the establishment of a scale-up fund and an ultra-long-term (minimum 10 years) technology investment fund, large-scale growth capital and long-term investment will be provided to potential scale-up companies and deep tech firms, respectively. Investments will focus on pre-IPO firms and early-stage KOSDAQ listed companies, while an exit market targeted fund will also be established to assist mergers and acquisitions (M&As) and business restructuring, which will help to foster a virtuous cycle from investment to exist to reinvestment. Moreover, at least KRW200 billion a year will be allocated to the regional high-tech industry fund set up to make investments of at least 60 percent or more in regional businesses. When selecting a fund management company for the operation of this regional high-tech industry fund, there will be additional points and incentives given to those located in regional economies with closer knowledge and understanding of particular characteristics of regional businesses.
The method for selecting fund management companies will also be upgraded from the short-term yield-driven approach of the past to a truly value enhancing model for invested companies.
b) KRW15 trillion in direct investment support
Direct investment in the amount of KRW15 trillion will be utilized as a source of strategic investment support for businesses requiring large-scale and long-term investments in facilities or production lines, which will help to strengthen the global competitiveness of domestic high-tech companies.
In this regard, the traditional deal sourcing mechanisms will be diversified to seek out more technologically innovative and promising companies that may not necessarily have the capacity to show strong financial record or collateral yet. Based on the current approach, the deal sourcing process is largely driven by the Korea Development Bank (KDB) and major financial holding groups, which tend to focus heavily on the financial background of an enterprise instead of its technological prowess, leading to potential problem of information asymmetry and missed opportunity for investment.
To address this problem, a private-public joint consultative body will be set up under the National Growth Fund Promotion Bureau, with participation from venture capital and private equity firms and relevant government ministries, to selectively seek out promising companies that require follow-up investments.
In the meantime, for high-risk or patient capital investment projects, the public portion of investment will take a subordinated investment position to actively provide the role of pump-priming for private sector investments.
c) Low interest lending support for SMEs and MMEs
There will be an expanded level of lending support provided to small- and medium-sized enterprises (SMEs) and middle market enterprises (MMEs) at low interest rates. Through the creation of a project fund or a special purpose company (SPC), large companies will be encouraged to jointly invest in their suppliers and partners in the supply chain to promote a model of co-prosperity.
In this regard, the NGF will be operated in ways to more quickly deliver investment support for the SMES and MMEs operating outside the Seoul metropolitan area to promote a well-balanced growth across different regions.
Further Plan
Based on the measures that have been discussed and announced at the committee meeting today, the selection of fund management companies will take place in the second quarter of this year for the operation of the private-public joint fund (for institutional investors), which will then begin to make investments in industries from as early as the end of this year. Direct investments and low interest lending support will be provided to industries on a rolling basis tailored to the needs of specific businesses or industries. The FSC and the KDB plan to continue to seek additional areas where policy-based investment is deemed to be necessary for NGF’s megaprojects and work to provide timely and tailored investment support for businesses.
* Please refer to the attached PDF for details.